The dire announcements follow one another like tumbling dominoes: FedEx cuts pay for salaried personnel. Sears stops matching contributions to its workers' 401(k) plans. Dell extends unpaid holidays. The Seattle Times rolls out unpaid furloughs. Window manufacturer Pella institutes four-day workweeks.
Few companies, large or small, are immune to the grim economic reality gripping the country, and those that want to avoid ravaging their workforces through layoffs are employing less traditional strategies to keep their heads above roiling financial waters.
Reduction of salaries and/or hours: "The real danger I see in salary reduction is you may reduce people below the level where you get a favorable test as to whether they are exempt," says Patrick Stanton, a shareholder at Ogletree Deakins. "In other words, don't go too far with people who are close to that magic number for exempt versus non-exempt status."
According to the FSLA, the minimum weekly salary at which an employee is still considered exempt is $455. The courts have tended to look favorably, however, upon employers reducing exempt employees' work week, with a commensurate reduction in pay, without losing the exemption, Bellafronto says. That became a multimillion-dollar issue in 1995 when Wal-Mart reduced the summer salaries of 6,000 pharmacists (see "Summer Wages").